Deductions on termination of employment – Are they lawful?

In the recent decision of Bateup v Mornington Shire Council [2025] QIRC 61, the Queensland Industrial Relations Commission (Commission) ordered an employer to pay its employee the full amount of unpaid wages and annual leave entitlements that the employer had unlawfully deducted from the employee’s final pay.

What happened in this case?

Mr Bateup commenced employment with Mornington Shire Council (Council) on 1 September 2023 in the role of Manager Infrastructure Delivery. He signed a Letter of Appointment which contained the terms and conditions of his employment as provided by the Council.

The Letter of Appointment included clauses requiring the reimbursement of relocation expenses in particular circumstances (including where Mr Bateup resigned within the probationary period) and deductions from Mr Bateup’s pay for debts owed to the Council.

The Council paid an amount of $3,788.74 to reimburse Mr Bateup for his relocation expenses.

Mr Bateup ceased employment with the Council during his probationary period. The Council withheld $3,788.74 from Mr Bateup’s final payment of wages and entitlements.

Key provisions

Under the Industrial Relations Act 2016 (Qld) (Act) an employer must pay the employee the agreed rate without deduction, other than a deduction authorised by the Act or with the employee’s consent.

Additionally, the Act states that if an employee’s consent authorising a deduction to be made from wages is not written, before making the deduction, the employer must give the employee written acknowledgement of the consent.

The Council submitted that the deduction was authorised by Mr Bateup by way of Mr Bateup’s signature on the Letter of Appointment.

Decision

The Commission, finding that the deduction was unlawful, stated that Mr Bateup’s signature on the Letter of Appointment was insufficient evidence that Mr Bateup consented to the deduction or withholding of an amount to reimburse the Council for the relocation expenses.

The Commission held that ‘a blanket acceptance of the “terms and conditions” of employment of this type does not reflect consent for the specific deduction that ultimately occurred.’

The Commission further found no evidence of written consent authorising the ‘specific deduction from Mr Bateup’s wages relating to the relocation expenses’, and said that in those circumstances, the Council could not lawfully withhold the cost of relocation from Mr Bateup’s final pay.

How do deductions work under the Fair Work Act?

This case serves as a good reminder for employers when attempting to deduct amounts from an employee’s payments on termination. Similarly to the provisions under the Act, under the Fair Work Act 2009 (Cth) (FW Act), employers can only make deductions from an amount payable to the employee in relation to the performance of work under the FW Act when the following requirements are satisfied:

• the employee agrees in writing to the deduction and the deduction is principally for the employee’s benefit; or
• the deduction is authorised by or under law, an industrial instrument, or an order of a court or the Fair Work Commission.

Additionally, a deduction authorised in writing and principally for the employee’s benefit must specify the:

• amount of the deduction;
• purpose of the deduction;
• date on which the deduction is to be made (if there is going to be multiple deductions you must also include the frequency of the deductions); and
• name of the person to whom the amount of the deduction is to be given.

The employee’s authorisation may be withdrawn in writing by the employee at any time.

Key takeaways for employers

Whilst it is common to have provisions in employment contracts stating that an employer can deduct any monies the employee owes to the employer from the employee’s pay (including on termination), employers must be mindful of the rules around deductions, particularly in relation to training benefits, payments for courses, relocation expenses etc.

We generally recommend a separate agreement for these types of arrangements, to ensure employers are meeting the requirements of the FW Act. This agreement should include, without limitation:

• the reason for the deduction;
• the amount of the deduction;
• that the employee authorises the deduction and agrees that it is principally for their benefit; and
• that if the amount of the deduction is more than the employee’s termination pay, the employee needs to repay the amount to the employer within a required timeframe.

Given the complexities around permitted deductions under the FW Act, we recommend an employer seek advice before proceeding with any deductions from an amount payable to an employee. The Workplace Advisory and Disputes team at Gadens regularly provides advice about employment contracts and proposed deductions and is able to assist you with any queries.

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Authored by:
Erin Lynch, Partner
Rocio Jamardo Paradela, Associate